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Monday, August 22, 2022
Today’s newsletter is from Brian Sozzieditor-in-chief and Anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and up LinkedIn.
Dear meme community,
I know we’ve had our differences, but hear me out.
I’d like to think I understand all (or most) of you — from the early days when the movement against “the man” (aka Wall Street) — started with GameStop in 2020.
I get someone’s desire to build wealth with little capital to start. I buy 10 shares of a $5.00 stock and hope it goes to $25 and how that could be life changing. I understand how the entire investment process seems rigged against someone who is just trying to make enough money in the market to send their kid to college. I saw this firsthand in my analyst days.
I also understand how intoxicating it can be to fall in love with a story, with said intoxication usually fueled by a leader who has been put on a pedestal and almost becomes this mythical creature.
And in that respect, I understand your love for Ryan Cohen’s mythical creature. I see your enthusiastic posts on Reddit, believing that Cohen will change the future of Bed Bath & Beyond and GameStop. Or, at the very least, you’re hoping he writes another mean letter to Bed Bath & Beyond management so the stock runs out. And, ideally, it presents a big stock-price-moving vision for GameStop — where Chewy’s founder plays chairman.
What I hope to get you thinking today is that Ryan Cohen is a billionaire trying to grow his wealth and market influence through RC Ventures because he can. And please understand: If that means he has to run away from you to make it happen, he will without a doubt.
How is that not one of the takeaways after last week’s Bed Bath & Beyond shenanigans?
Bloomberg estimated that Cohen earned $68.1 million from his stake in Bed Bath & Beyond in seven months. A big part of that gain arguably came in the last few days of trading: The stock soared early last week on reports of Cohen’s options play at BBBY. As of Thursday, a filing is on record that Cohen has disposed of his stake. The stock tumbled 40% on Friday and remains under pressure as investors return to focusing on the company’s formidable fundamentals.
In short, Cohen played an entire ecosystem of mediocre investors like a fiddle in true Wall Street fashion. Cohen made his money and has left a lot of average people holding the bag. It could do the same with GameStop if it wants or other smaller companies to overtake the companies. Why; Because he can and you can’t.
Another related point: Cohen has largely disappeared from media land (aside from his odd tweets) as he tries to perpetuate his mythical creature. Here’s Cohen on Yahoo Finance Live in 2019 around the time of Chewy’s IPO. As investors, it’s good to see people you trust.
All this is to say: Be careful who you walk into, meme community. Cohen has not earned your trust, nor has he earned that “activist” label that many people have assigned him. Want to get a feel for true activist investing? Take a deep dive into Elliott Management. They do things in a big way.
What to watch today
Zoom (ZM), Nordson (NDSN), Palo Alto Networks (PANW)
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